May 04 2017 0Comment

Costs of higher ed and budgets

Today’s higher education leaders are caught in the middle of two philosophies. The first philosophy is that the purpose of higher education is to prepare students to be good citizens, be civically engaged when they reach adulthood and prepare them for productive careers. The other philosophy, as noted in the documentary Starving the Beast, suggests that higher education’s mission should be to prepare students to be productive participants in the economy.

Many conservative policymakers and think tanks embrace this latter view, and are looking at ways to cut higher education budgets and impose a “profitable” business model on the educational system, instead of embracing the former mission. Furthermore, these groups often believe that preparing young people to be good citizens AND for productive careers is no longer appropriate – preparing citizens should be the role of the parents and churches, and schools should not be involved with this.

This philosophy has been implemented in some states for many years. As The Atlantic noted, the Center on Budget and Policy Priorities pointed out that state and local funding comprised slightly less than 55 percent of the money used for teaching and instruction in 2015. “While states have added some funding since the recession, it’s still about 18 percent per student lower than it was in 2008, according to the center,” reporter Emily Deruy wrote, adding that  these funding levels are still 40% less than in 1980.  

These continual cuts have sent higher education into a downward spiral. “We need the business communities, the chambers of commerce, the volunteer organizations and the people who work with unemployed people and that kind of thing. We need more people to step up to these legislators and say ‘This is the most important function in the world and you need to fund it.  And the less you fund it the more you are going to fund prisons and some other things,” said New Mexico State University President Dr. Garrey Carruthers during a presentation by four higher education leaders from New Mexico and Texas.

Tax cuts, slow economic growth, Medicaid costs and low oil prices are causing legislators to consider further cuts to higher education cuts. Some states are now facing multiple threats, such as caps or freezes on tuition. For instance, funding in Texas is expected to remain flat and legislators are considering restricting tuition and ending a set-aside that assists low-income students with covering college costs.

Funding cuts have led to reductions in campus staff, student support services and course offerings. Michael Mitchell pointed out the following in the Huffington Post:

  • Every state with the exception of Alaska, North Dakota and Wyoming has cut spending per student between the 2007-2008 school year and the 2014-2015 school year.
  • Most of these cuts were significant with the average student spending per student dropping by 20 percent.
  • The annual tuition at four-year public colleges rose by almost 30 percent, a significant increase in the cost for students. However, average tuition growth slowed to 1.2 percent between 2014-2015.
  • Between 2014-2015, 37 states increased per-student funding by an average of nearly 4 percent.

These state-level funding decisions are having long-term implications for higher education.  For instance, Moody’s Investors Service downgraded Northeastern Illinois University and placed six public universities in Illinois on review for credit downgrades, which could affect about $2.2 billion of the universities’ debt. This review comes as a result of the huge cuts in higher ed (and non-funding of higher ed institutions)by Illinois state policymakers.

Therefore, it’s not surprising that finances continue to top higher education leaders’ worry list. Research by The Change Leader identified the four concerns topping the Board and cabinet’s list of top business issues in 2017:

  • Diversification of revenue
  • Increasing reliance on tuition for revenues
  • Affordability of education
  • Decreasing or stagnant revenues.

Looking at Tuition and Beyond

As we noted in last week’s column on tuition, it’s imperative in today’s increasingly turbulent world for higher education leaders to look systemically at the bottom line of higher education.  While increasing tuition rates is one source of budgetary revenue, it is becoming less feasible as students increasingly balk at taking on student loan debt. In fact, a new volume of research being published by the American Academy of Political and Social Science suggests that additional studies are needed on student debt so that policymakers have better data to use in their decision-making. Some point out that much of the research data is self-reported by students because researchers cannot get access to U.S. Department of Education records.

Several areas beyond tuition also are coming under a microscope. In a Denver Post op-ed, columnist Megan Schrader points to sharply increasing prices for health insurance and retirement plans for employees  as well as what Schrader describes as “the arms race for modern, luxury facilities.”

So how are colleges and universities coping?  

Controling Costs

In our past two blogs, we’ve talked about the rising student debt and how public support for higher ed has been cut.  In this week’s blog, we turn our focus to how colleges and universities are coping with these cuts.

Administration

Administrative costs are among the first to be targeted by naysayers when discussing budget cuts for public institutions. Indeed, some university systems across the country are finding ways to cut the cost of administration. For instance, Connecticut State College and University system is considering consolidating administrative personnel across 17 colleges and universities as well as consolidating operations at 12 community colleges.  The University System of Georgia is merging its 14 colleges and universities into seven campuses, and reviewing administration at campus and system offices.

For private institutions, mergers and shared services are one way many are coping, while others are cutting staff and relying more on adjuncts instead of tenured faculty.  Benefits packages are being cut, especially medical insurance and retirements, as those costs continue to rise at unsustainable rates.  

Non-Academic Areas

Non-academic areas also are early targets during budget cuts. These cuts extend past personnel and are targeting programs. For instance, Missouri State is cutting its Jefferson City internship program, summer graduation and Ozark Celebration Festival and will eliminate its funding for the Center for Community Engagement.

While privatization is often considered for areas such as grounds and food services, leaders are considering finding ways to fund established programs.  For instance, Southern Illinois University is considering recommendations to make 15 centers and initiatives self-supporting, thus eliminating state funding by 2022.

Facilities

Some higher education institutions are finding that the race to build new facilities is now taking a toll on their budgets as well as their reputations. One of the prime examples is UMass Boston, which has been pursuing a 10-year master plan that called for $750 million in construction. The university is now facing repairs to an unstable underground parking garage completed in the 1970s that has caused a budget deficit estimated at $300 million. This situation has led to public outcry and a change in the university’s leadership.

Some states also are pushing back on higher education’s efforts to diversify their programs through expensive land purchases and the construction of new campuses. For instance, Texas legislators are considering trying to rein in a number of universities that have ambitions of creating programs in other parts of the Lone Star State. These additions, if completed, would compete with campuses from other university systems.

Academics

As budgets continue to tighten, academic programs increasingly are feeling the pinch. Long Island University’s Board of Trustees is imposing a credit cap and tight timeline to develop a streamlined core curriculum. States like California are looking at different academic configurations such as allowing some community colleges are offering four-year baccalaureate programs. However, certain programs, such as the doctorate of nursing, face elimination because the nursing shortage has been curtailed and the program didn’t graduate the anticipated nursing faculty. Illinois’ state budget – which is based on a compromise between the Republican governor and Democratic legislators – includes cuts that forced professors to take unpaid days off and cancelled classes at Northeastern Illinois University. In addition, budget cuts have forced universities to rely heavily on adjunct professors and teaching assistants.

Some think tanks also are encouraging paradigm shifts in how academics are delivered to students. Interestingly, the Council of Independent Colleges suggests that states follow New York’s lead of providing tuition assistance to private universities. The think tank believes that this move would save costs because students would attend often under-utilized private colleges rather than overcrowded public institutions of higher education.

Final Thoughts

Higher ed is facing a tsunami of changes, Some of these changes are brought on by institutions’ own overspending, but many financial situations are caused by state and federal funding cuts.  In next week’s blog, we’ll look at some new ideas on how to address these challenges.

 

ryan